Vonage (NYSE: VG) continues to struggle on Wall Street, posting a loss for the third quarter. Sales dropped 2 percent to $221.5 million even as average revenue per line rose 4 percent to $29.89. Once a leader in VoIP, Vonage is now facing stiff competition from cable, telecom, digital phone providers, and wireless carriers that keep rolling out affordable priced packages.
While Vonage blames the slump on a marketing campaign promoting a flat $25 fee for unlimited international calls, analysts believe the poor earnings is due to its declining customer base.
One of the biggest reasons subscribers have canceled their service with Vonage is due to poor customer service, dropped calls, phone number transfers, and price increases.
Currently, Vonage charges new subscribers $69 to start and $29 a month. Even though they market their service as having no contracts or long term commitments, Customers must pay a termination fee of $39.99 if they wish to cancel their subscription within 2 years of service. Customers who have attempted to cancel their subscription describe a hold time of 25 minutes.
On a positive note, Vonage has stated that its new application for Apple iPhone and the BlackBerry devices is attracting positive attention. The application allows users to make international voice over ip calls from their phones.
Will the new app be enough to improve Vonage's future outlook now that the highly anticipated Motorola Droid will be integrated with Google Voice will be available to customers this month?
Not only that, but will an iPhone/Blackberry app matter if Vonage continues to lose their customer base, offer poor customer service, and offer over priced and buggy VoIP service while their financially strong competition continues to roll out affordably priced services and enticing bundle packages?
Only time will tell.
While Vonage blames the slump on a marketing campaign promoting a flat $25 fee for unlimited international calls, analysts believe the poor earnings is due to its declining customer base.
One of the biggest reasons subscribers have canceled their service with Vonage is due to poor customer service, dropped calls, phone number transfers, and price increases.
Currently, Vonage charges new subscribers $69 to start and $29 a month. Even though they market their service as having no contracts or long term commitments, Customers must pay a termination fee of $39.99 if they wish to cancel their subscription within 2 years of service. Customers who have attempted to cancel their subscription describe a hold time of 25 minutes.
On a positive note, Vonage has stated that its new application for Apple iPhone and the BlackBerry devices is attracting positive attention. The application allows users to make international voice over ip calls from their phones.
Will the new app be enough to improve Vonage's future outlook now that the highly anticipated Motorola Droid will be integrated with Google Voice will be available to customers this month?
Not only that, but will an iPhone/Blackberry app matter if Vonage continues to lose their customer base, offer poor customer service, and offer over priced and buggy VoIP service while their financially strong competition continues to roll out affordably priced services and enticing bundle packages?
Only time will tell.
Comments
TruthTeller
(Guest)
(Guest)
12/23/2009
Heather,
You should really stick to being a stay-at-home housewife. Your analysis is pitiful. Come to think of it, there's actually no analysis in your article. Just a bunch of heresay, whatever you managed to half-read in the headlines and skimming of a few other poorly written articles.
If you went to sign up for the VG service, you'd see that the customer service is world class. Lots has changed in the last year and a half at that company. Of course, you wouldn't have the slightest clue about it.
Do you know what $420M annualized pre-marketing operating income means? Look into it and let's get your thoughts on VG ARPU, churn trend, and PMOI in your next piece. That would be a real treat. TIA.
Former Vonage Customer
(Guest)
(Guest)
11/19/2009
Vonage is losing customers because of all their hidden fees. Its true Vonage has the $24.99 rate plan, with taxes and fees its comes out to over $30 . If you want to change to a lower rate plan, it costs you $10 bucks to do so. If you signed up with Vonage before May 2009, your service commitment is 2 years or you get dinged with a $40 early termination fee. They did not make this ETF explicit, it was burried deep down in their TOS, all the while misleading customers who thought they had a 1 year commitment. And when you do cancel, they do not prorate your final month. I honestly can't believe people are defending Vonage (unless they are Employees of Vonage). I bought an OOMA, I spent a flat rate $150 on it and it works great. I will never go back to Vonage.
DayDreamer
(Guest)
(Guest)
11/06/2009
Extremely shoddy journalism. Heather should read the earnings call transcript before putting out such a false report. There was no "blame" on marketing expenses. Significant subscriber increases were reported in the last few weeks of the quarter, and there was sequential quarter-to-quarter growth. There are much better reports on Vonage out there. Shame!
TruthTeller
(Guest)
(Guest)
11/06/2009
This report is full of false information. Written by a moron who knows nothing about the company, its product roadmap, its earnings power, nor the makeup/demography/means of the new breed of worldplan customers.
Vonage just reported $.03 a share in EPS, unadjusted for the accounting treatment of the convertible debt feature.
Next quarter will be $.05 a share with 50K or so new customers.
What a joke. Get your stuff straightened out, and compose an article on something you actually understand... which obviously isn't Vonage.
Randomizer
(Guest)
(Guest)
11/06/2009
Most people who report poor call quality is normally a result of a poor broadband connection with low throughput and high latency. Many of these users don't really realize how much the quality of the service depends on the quality of their internet connection
kris
(Guest)
(Guest)
11/06/2009
This report doesn't make sense. vonage residential plans are $24.99, with free activation and shipping. Early termination fee is for 1 year not 2 years as claimed. Call Quality to is Very Good. I got good customer service. Heather get your facts right.
Sam
(Guest)
(Guest)
11/06/2009
I agree with Jay. The claims here are totally false. Vonage is by far the best voip pohone service now..
Jay
(Guest)
(Guest)
11/05/2009
I am a Vonage customer and I would like to dispute claims in this article in regards to customer service and monthly charges. Information provided in the article is totally.
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